The Evolving Brazilian Acquiring Market

by Terry X Xie 0

The Brazilian merchant acquiring market isundergoing one of the biggest fundamental changes in industrystructure. In the past, the market was a duo-play one with VisaNetand Redecard being the exclusive card acquirer for Visa andMasterCard cards, respectively. This structure had long beencriticized for causing high merchant costs by preventingcompetition. Halfway through 2010, the Merchant Discount Rate (MDR)in the market peaked at almost 130 basis points, compared to the 20to 90 basis point in many markets.

Brazilian regulators in July 2010 moved in and ordered the twoacquirers to break their exclusive agreements with Visa andMasterCard after a long period of observing and evaluating thesituation. Now the two acquirers can acquire any card brand and cancompete directly with each other. The move also opened the door fornew entrants, both local and international.

A price war between the two major acquirers immediately followed.And new players also added to the price pressure. Within a yearafter the change, the average MDR quickly dropped 16% between thesecond quarter 2010 and the second quarter 2011. The rate has sincestabilized at slightly above 1%.

More discussions about the evolving Brazilian acquiring market canbe found in the upcoming Mercator Advisory Group report: BrazilianPayments Market Update (expected in May 2012). For moreinformation, click here to visit our website.